The big day is finally here. Seems like only yesterday I was grumbling and updating my crypto carbon spreadsheet and wondering, can Vitalik Buterin just announce a date already? And now it’s real. Ethereum has cut its carbon footprint by more than 99.988%.
If you follow crypto, you know about the Merge already. You are probably either annoyed that the price of ETH has not risen more, or relieved that BTC is not sinking further. This has not been a good year for crypto speculators, to put it mildly. But that isn’t really what this major upgrade to Ethereum’s core protocol is about.
ETH is far more than just another coin. It powers two of the most important and influential token standards of the crypto world: ERC-20 and NFT. Currencies built on the ERC-20 standard include heavyweights like Shiba Inu (SHIB), Tether (USDC), and USD Coin(USDT). NFTs (Non Fungible Tokens) are a way to mint and sell limited-edition digital art and collectibles.
I am writing this article for people like my friend from college who is a part-time film professor, and is amazingly knowledgeable about all kinds of art and media. We talked last fall about the potential to curate and make sense of the vast panoply of NFTs in existence, a multibillion dollar market where sale prices range from $69 million to zero.
He was excited and enthusiastic, until he found out about Ethereum’s steep carbon footprint. Then he was completely out.
Artists, by and large, are an idealistic crowd. They have also seen their revenue streams decline or disappear over the Internet era, even as skilled technology workers see their incomes rise. More than anyone, creatives can stand to benefit from standards that make it easier to monetize content in a digital world.
NFT’s are far from the only way for content creators to make money from the Ethereum standard. It powers a global decentralized computing network on which digital applications, or dApps, can run — impervious to borders, changes in legal regime, or the pressure of inflation on fiat currencies.
Nor are artists the only stakeholders for whom sustainability is a deciding factor. Large corporations, among them Bank of America, have signaled renewed willingness to invest in cryptocurrency now that Ethereum is putting its ESG house in order.
Just how much of a difference does the Merge make? In 2021, the carbon emissions produced by a single Ethereum transaction were equivalent to that produced by driving 114 miles — just under one sixth of that produced by a Bitcoin transaction, whose CO2 footprint per transaction was a jaw-dropping .3092 tons. (And yes, these calculations do take into account renewables as an energy source.)
Trading crypto for speculation purposes only is much the same as putting your engine in neutral, then revving it for hours upon hours, all while blasting the AC and the stereo at full volume. But with any semblance of luck and sanity whatsoever, makers and builders are entering the next phase in crypto’s evolution.
It’s full speed ahead. Nothing is holding us back.
Lotus Rose is not a registered investment, legal or tax advisor or a broker/dealer. All investment and financial opinions expressed on Lotus Trader are from the personal research and experience of the owner of this newsletter and intended for educational and informational purposes only. Although every effort is made to ensure that all information is accurate and up-to-date, occasional unintentional errors may occur.